Performance Comparison and Investors Perception About Investing in Mutual Funds at NJ India Invest 2010

A SUMMER INTERSHIP PROJECT REPORT
ON
“Performance Comparison
and
Investors Perception about Investing in
mutual funds"
At
Udaipur, Rajasthan
IN THE PARTIAL FULFILLMENT FOR THE AWARD OF

OF MASTERS IN BUSINESS ADMINISTRATION
SUBMITTED TO
ADVENT INSTITUE OF MANAGEMENT STUDIES

UDAIPUR
UNDER THE GUIDANCE OF: SUBMITTED BY:

Mr. AMIT SONI VAIBHAV KUMAR JHANWAR
ADVENT INSTITUTE OF MANAGEMENT STUDIES 1
AUTHORISATION
This report is submitted as partial fulfillment of the requirement of MBA program of

RAJASTHAN TECHNICAL UNIVERSITY. The report on the title “Performance
Comparison and Investors Perception about Investing in mutual funds " is an
original work and has not been submitted to any other institution or university for the
award of any degree or diploma.
Place: Udaipur
Date : VAIBHAV KUMAR JHANWAR

ACKNOWLEDGEMENT
Apart from individual efforts, the success of any project depends largely on the
encouragement of many others involved directly and indirectly. I take this opportunity
to express my heartfelt gratitude to the people who have been influential in the progress
of this project. I consider it my pleasant duty to acknowledge my deep sense of
gratitude to Mr. Amit Soni, Branch Manager, NJ India Invest, Udaipur for his
continuous guidance and direction to the exercise.
I am also grateful to Mr. Yogesh Jain, Mr. Jitendra Jain - Sales Executive for his
cooperation and guidance in learning the nuances of MF Industry.
I would like to thank all the people of NJ India Invest, Udaipur for the support they gave
for the completion of the project.
Date:
Place: Udaipur

PREFACE
Finance & its functions are the part of economic activity. Finance is very essentially
needed for all types of organizations viz; small, medium, large-scale industries & service
sector. Hence the role of finance manager & the subject finance accounting gained
maximum importance. Liberalization, globalization & privatization created new
challengers to entrepreneur & corporate in carrying they’re day to day activities. So,
“finance is regarded as the life blood of a business organization.”
Master of business administrator is professional course which develop a new body of
knowledge & skill set & make as available for those seeking challenging carriers in the of
liberalization & globalization.
The goal of the Summer Training is to give a corporate exposure to the students as well
as to give them an opportunity to apply theory into the practice. The real business
problems are drastically different from class-room case solving. Summer Project aims to
providing little insight into working of an organization to a management trainee. Among
every stage of knowledge being inculcated in students, practical training in the corporate
world plays a significant role in exhibiting and pruning their capabilities.
The purpose behind writing a report is to put in to works the practical training that is
imparted into me that gives a better and a clear understanding of the experience I got.
“Performance Comparison
and
Investors Perception about Investing in mutual funds”
Table of Contents

S.No. Particulars
P.No.
1. Objective of study 1
2. History of Indian Mutual Fund Industry 2-3
3. Basic Organisation of a Mutual Fund 4
4. Important characteristics of a mutual fund 5
5. Objective of a mutual fund 6
6. Mutual fund – But why 6-8
7. Disadvantages of Mutual fund 9
8. Mutual fund structure 10
9. Mutual fund who invests? 11
10. Organisation and management of mutual fund 12-15
11. Mutual fund – types 16
12. Mutual fund – scheme types 17-19
13. Different modes of receiving the income earned
from mutual fund investments 19-20
14. Mutual fund investing strategies 20
15. Mutual fund risk associated 21-22
16. Performance measures of mutual fund 23-27
17. Mutual fund companies in India 28
18. Mutual fund Do and Dont’s 29-31
19. Future of mutual fund industry in India 32-34
20. Rolf of AMFI 35-36
21. SEBI guidelines for mutual fund 37-39
22. ULIP v/s. Mutual fund 39
23. Growth in asset under management 40-42
24. Assets under mgmt as on June 30, 2010 43
25. BCG Report on Equity MF 44-48

26. Performance Comparison of Different MF in India 49-53
27. Company Overview – About NJ India Invest 54-55
28. Philosophy 55-56
29. Vision and Mission 56
30. Division 57-58
31. Management 58-59
32. Products 59
33. People 60
34. Culture 60
35. Service standards 61-62
36. Recognitions 62-63
37. 360° – Advisory Platform 64-65
37. Mutual funds Advisor 66
38. Know your Client – KYC 67-69
39. NISM for CPE Registration Form 70
40. Questionnaire 71-73
41. Responses 74
42. Suggestions 75
43. Conclusion 76
44. Recommendations 77
45. Bibliography and websites 78
OBJECTIVE OF STUDY
1 ) Understanding Mutual Funds

2 ) Understanding Market Potential of Mutual funds.
3 ) Understanding which mutual fund is good for whom.
4) Analyzing Awareness of Mutual Funds among insurance advisors, Post Office -

RD/FD agents.
5) Analyzing risk and return involved in different schemes of mutual funds.
6) Recruitment of partners for NJ Invest.
7) Analyzing investors perception about investing in mutual funds.
HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY
The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank. Though the growth

was slow, but it accelerated from the year 1987 when non-UTI players entered the
Industry.
In the past decade, Indian mutual fund industry had seen a dramatic improvement,
both qualities wise as well as quantity wise. Before, the monopoly of the market had
seen an ending phase; the Assets Under Management (AUM) was \ 67 billion. The
private sector entry to the fund family raised the AUM to \470 billion in March 1993 and
till April 2004; it reached the height if \1540 billion.
The Mutual Fund Industry is obviously growing at a tremendous space with the mutual
fund industry can be broadly put into four phases according to the development of the
sector. Each phase is briefly described as under.
The history of mutual funds in India can be broadly divided into four distinct
phases:
First Phase: 1964-1987
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had \ 6,700 cores of assets under management.
Second Phase: 1987-1993 (Entry of Public Sector Funds)
In 1987 marked the entry of non- UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June1987followed by Canara bank Mutual Fund (Dec 87), Punjab National
Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),
Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989
while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual
fund industry had assets under management of \ 47, 004 cores.
Third Phase: 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual
fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was
the year in which the first Mutual Fund Regulations came into being, under which all
mutual funds, except UTI were to be registered and governed. The erstwhile Kothari
Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993. The industry now functions under the SEBI (Mutual Fund)
Regulations1996.As at the end of January 2003; there were 33 mutual funds with total
assets of \ 1,21,805 crores. The Unit Trust of India with \ 44,541 crores of assets under
management was way ahead of other mutual funds.
Fourth Phase – Since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust
of India with assets under management of \ 29, 835 crores as at the end of January
2003, representing broadly, the assets of US 64 scheme, assured return and certain
other schemes.The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. The
graph indicates the growth of assets over the years.
Basic Organisation of a Mutual Fund

There are many entities involved and the diagram below illustrates the organizational
set up of a Mutual Fund. These entities will be explained later in the report.
Mutual Funds diversify their risk by holding a portfolio of instead of only one asset.
This is because by holding all your money in just one asset, the entire fortunes of your
portfolio depend on this one asset. By creating a portfolio of a variety of assets, this
risk is substantially reduced.
Mutual Fund investments are not totally risk free. In fact, investing in Mutual Funds
contains the same risk as investing in the markets, the only difference being that due
to professional management of funds the controllable risks are substantially reduced. A
very important risk involved in Mutual Fund investments is the market risk. However,
the company specific risks are largely eliminated due to professional fund
management.
IMPORTANT CHARACTERISTICS OF A MUTUAL FUND

• A Mutual Fund actually belongs to the investors who have pooled their Funds.
The ownership of the mutual fund is in the hands of the Investors.
• A Mutual Fund is managed by investment professional and other Service

providers, who earns a fee for their services, from the funds.
• The pool of Funds is invested in a portfolio of marketable investments.
• The value of the portfolio is updated every day.
• The investor’s share in the fund is denominated by “units”. The value of the
units changes with change in the portfolio value, every day. The value of one
unit of investment is called net asset value (NAV).
• The investment portfolio of the mutual fund is created according to The stated
Investment objectives of the Fund.
OBJECTIVES OF A MUTUAL FUND

• To Provide an opportunity for lower income groups to acquire without much
difficulty, property in the form of shares.
• To cater mainly of the need of individual investors who have limited means.
• To Manage investors portfolio that provides regular income, growth, safety,
liquidity, tax advantage, professional management and diversification.
MUTUAL FUND—BUT WHY??
Here are some of the Advantages offered by Mutual Funds-:
Number of available options
Mutual funds invest according to the underlying investment objective as specified at the
time of launching a scheme. So, we have equity funds, debt funds, gilt funds and many
others that cater to the different needs of the investor. The availability of these options
makes them a good option. While equity funds can be as risky as the stock markets
themselves, debt funds offer the kind of security that is aimed for at the time of making
investments. Money market funds offer the liquidity that is desired by big investors who
wish to park surplus funds for very short-term periods. Balance Funds cater to the
investors having an appetite for risk greater than the debt funds but less than the equity
funds.
Diversification

Investments are spread across a wide cross-section of industries and sectors and so the
risk is reduced. Diversification reduces the risk because all stocks don’t move in the
same direction at the same time. One can achieve this diversification through a Mutual
Fund with far less money than one can on his own.
Professional Management
Mutual Funds employ the services of skilled professionals who have years of experience
to back them up. They use intensive research techniques to analyze each investment
option for the potential of returns along with their risk levels to come up with the figures
for performance that determine the suitability of any potential investment.
Liquidity
Mutual Funds offer the benefit of liquidity which provides the investor with the option of
easy conversion to money. As in the case of fixed deposits, where the investor can get
his money back only on the completion of a fixed period, an investor can get his money
back as and when he wants. Investors can redeem their money at the prevailing NAV’s
(Net Asset Values). Mutual funds directly re-purchase at the current NAV.
Well Regulated
Unlike the company fixed deposits, where there is little control with the investment
being considered as unsecured debt from the legal point of view, the Mutual Fund
industry is very well regulated. All investments have to be accounted for, decisions
judiciously taken. SEBI acts as a true watchdog in this case and can impose penalties on
the AMCs at fault. The regulations, designed to protect the investors’ interests are also
implemented effectively.
Transparency
Being under a regulatory framework, mutual funds have to disclose their holdings,
investment pattern and all the information that can be considered as material, before all
investors. This means that the investment strategy, outlooks of the market and scheme
related details are disclosed with reasonable frequency to ensure that transparency
exists in the system. On the other hand, the investor is totally clueless in case of the
other investment alternatives as nothing is disclosed.

Savings
Tax saving schemes of Mutual Funds offer investor a tax rebate under section 88 of the
Income Tax Act. Under this section, an investor can invest up to \ 10,000 per Financial
year in a tax saving scheme. The rate of rebate under this section depends on the
investor’s total income
Flexible and Affordable
Mutual Funds offer a relatively less expensive way to invest when compared to other
avenues such as capital market operations. The fee in terms of brokerages, custodial
fees and other management fees are substantially lower than other options and are
directly linked to the performance of the scheme. Investment in mutual funds also offers
a lot of flexibility with features such as regular investment plans, regular withdrawal
plans and dividend reinvestment plans enabling systematic investment or withdrawal of
funds. Even the investors, who could otherwise not enter stock markets with low
investible funds, can benefit from a portfolio comprising of high-priced stocks because
they are purchased from pooled funds.

Disadvantages of mutual funds
Mutual funds are good investment vehicles to navigate the complex and unpredictable
world of investments. However, even mutual funds have some inherent drawbacks.
Understand these before you commit your money to a mutual fund.
No assured returns and no protection of capital
If you are planning to go with a mutual fund, this must be your mantra: mutual funds
do not offer assured returns and carry risk. For instance, unlike bank deposits, your
investment in a mutual fund can fall in value. In addition, mutual funds are not insured
or guaranteed by any government body (unlike a bank deposit, where up to \ 1 lakh per
bank is insured by the Deposit and Credit Insurance Corporation, a subsidiary of the
Reserve Bank of India). There are strict norms for any fund that assures returns and it
is now compulsory for funds to establish that they have resources to back such
assurances. This is because most closed-end funds that assured returns in the early-
nineties failed to stick to their assurances made at the time of launch, resulting in losses
to investors. A scheme cannot make any guarantee of return, without stating the name
of the guarantor, and disclosing the net worth of the guarantor. The past performance of
the assured return schemes should also be given.
Restrictive gains
Diversification helps, if risk minimization is your objective. However, the lack of

investment focus also means you gain less than if you had invested directly in a single
security.
Assume, Reliance appreciated 50 per cent. A direct investment in the stock would
appreciate by 50 per cent. But your investment in the mutual fund, which had invested
10 per cent of its corpus in Reliance, will see only a 5 per cent appreciation.
Taxes
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes a profit on its sales, you
will pay taxes on the income you receive, even if you reinvest the money you made.
Management risk

When you invest in a mutual fund, you depend on the fund's manager to make the right
decisions regarding the fund's portfolio. If the manager does not perform as well as you
had hoped, you might not make as much money on your investment as you expected.
Of course, if you invest in Index Funds, you forego management risk, because these
funds do not employ managers.
MUTUAL FUND—STRUCTURE
Sponsor
Trustees Mutual fund
ASSET
MANAGEMENT
COMPANY
Custodian Registrar
A mutual fund is structured as mentioned above. Firstly, the investor invests his money
in the fund. Every mutual fund organization has a sponsor who is required to contribute
a minimum of 40% of the net worth of the AMC. It is the duty of the sponsor to
establish a fund and apply to SEBI for its registration. A person or a group of persons
known as trustee is given an overall authority over the fund managers. They basically
safeguard the assets of the fund. The fund is created which is managed by the AMC
which is given the powers to take all decisions relating to the investment. There is
another entity known as the custodian, who basically stocks a fund’s securities and
other assets. The registrar is an institution which maintains a register of all the unit
holders of a fund along with their ownership. Finally, the SEBI is the ultimate authority.

MUTUAL FUND—who invests?
Investor Profile:
An investor normally prioritizes his investment needs before undertaking an

investment. Different goals will be allocated to different proportions of the total
disposable amount. Investments for specific goals normally find their way into the debt
market as risk reduction is of prime importance, this is the area for the risk-averse
investors and here, Mutual Funds are generally the best option. One can avail of the
benefits of better returns with added benefits of anytime liquidity by investing in open-
ended debt funds at lower risk, this risk of default by any company that one has
chosen to invest in, can be minimized by investing in Mutual Funds as the fund
managers analyze the companies financials more minutely than an individual can do as
they have the expertise to do so.
Moving up the risk spectrum, there are people who would like to take some risk and
invest in equity funds/capital market. However, since their appetite for risk is also
limited, they would rather have some exposure to debt as well. For these investors,
balanced funds provide an easy route of investment, armed with expertise of
investment techniques, they can invest in equity as well as good quality debt thereby
reducing risks and providing the investor with better returns than he could otherwise
manage. Since they can reshuffle their portfolio as per market conditions, they are
likely to generate moderate returns even in pessimistic market conditions.

Next comes the risk takers, risk takers by their nature, would not be averse to
investing in high-risk avenues. Capital markets find their fancy more often than
not, because they have historically generated better returns than any other
avenue, provided, the money was judiciously invested. Though the risk associated
is generally on the higher side of the spectrum, the return-potential compensates
for the risk attached.
ORGANISATION AND MANAGEMENT OF MUTUAL FUNDS
In India Mutual Fund usually formed as trusts, three parties are generally involved
viz.
• Settler of the trust or the sponsoring organization.

• The trust formed under the Indian trust act, 1982 or the trust company
registered under the Indian companies act, 1956
• Fund mangers or The merchant-banking unit
• Custodians.
MUTUAL FUNDS TRUST:
Mutual fund trust is created by the sponsors under the Indian trust act, 1982, which
is the main body in the creation of Mutual Fund trust.The main functions of Mutual
Fund trust are as follows:
♦ Planning and formulating Mutual Funds schemes.

♦ Seeking SEBI’s approval and authorization to these schemes.
♦ Marketing the schemes for public subscription.
♦ Seeking RBI approval in case NRI’s subscription to Mutual Fund is Invited
♦ Attending to trusteeship function. This function as per guidelines can be
assigned to separately established trust companies too. Trustees are required to
submit a consolidated report six monthly to SEBI to ensure that the guidelines

are fully being complied with trusted are also required to submit an annual
report to the investors in the fund.
FUND MANAGERS (OR) THE ASSET MANAGEMENT COMPANY (AMC)
AMC has to discharge mainly three functions as under:
I. Taking investment decisions and making investments of the funds through

market dealer/brokers in the secondary market securities or directly in the
primary capital market or money market instruments.
II. Realize fund position by taking account of all receivables and realizations,
moving corporate actions involving declaration of dividends,etc to compensate
investors for their investments in units; and
III. Maintaining proper accounting and information for pricing the units and arriving
at net asset value (NAV), the information about the listed schemes and the
transactions of units in the secondary market. AMC has to feed back the trustees
about its fund management operations and has to maintain a perfect information
system.
CUSTODIANS OF MUTUAL FUNDS:-
Mutual funds run by the subsidiaries of the nationalized banks had their respective
sponsor banks as custodians like canara bank, SBI, PNB, etc. Foreign banks with
higher degree of automation in handling the securities have assumed the role of
custodians for mutual funds. With the establishment of stock Holding Corporation
of India the work of custodian for mutual funds is now being handled by it for
various mutual funds. Besides, industrial investment trust company acts as sub-
custodian for stock Holding Corporation of India for domestic schemes of UTI, BOI
MF, LIC MF, etc
RESPONSIBILITY OF CUSTODIANS:-
♦ Receipt and delivery of securities

♦ Holding of securities.
♦ Collecting income
♦ Holding and processing cost
♦ Corporate actions etc
FUNCTIONS OF CUSTOMERS:-
♦ Safe custody
♦ Trade settlement
♦ Corporate action
♦ Transfer agents
FORMATION AND REGULATIONS
1. Mutual funds are to be established in the form of trusts under the Indian trusts
act and are to be operated by separate asset management companies (AMC s)
2. AMC’s shall have a minimum Net worth of \ 5 crores;
3. AMC’s and Trustees of Mutual Funds are to be two separate legal entities and
that an AMC or its affiliate cannot act as a manager in any other fund;
4. Mutual funds dealing exclusively with money market instruments are to be
regulated by the Reserve Bank Of India
5. Mutual fund dealing primarily in the capital market and also partly money
market instruments are to be regulated by the Securities Exchange Board Of
India (SEBI)
6. All schemes floated by Mutual funds are to be registered with SEBI
Schemes:-
1. Mutual funds are allowed to start and operate both closed-end and open-end
schemes;

2. Each closed-end schemes must have a Minimum corpus (pooling up) of \
20 crore;
3. Each open-end scheme must have a Minimum corpus of \ 50 crore
4. In the case of a Closed –End scheme if the Minimum amount of \ 20 crore
or 60% of the target amount, which ever is higher is not raised then the entire
subscription has to be refunded to the investors;
5. In the case of an Open-Ended schemes, if the Minimum amount of \ 50 crore
or 60 percent of the targeted amount, which ever is higher, is no raised then
the entire subscription has to be refunded to the investors.
Investment norms:-
1. No mutual fund, under all its schemes can own more than five percent of any
company’s paid up capital carrying voting rights;
2. No mutual fund, under all its schemes taken together can invest more than 10
percent of its funds in shares or debentures or other instruments of any single
company;
3. No mutual fund, under all its schemes taken together can invest more than 15
percent of its fund in the shares and debentures of any specific industry, except
those schemes which are specifically floated for investment in one or more
specified industries in respect to which a declaration has been made in the offer
letter.
4. No individual scheme of mutual funds can invest more than five percent of its
corpus in any one company’s share;
5. Mutual funds can invest only in transferable securities either in the money or in
the capital market. Privately placed debentures, securitized debt, and other
unquoted debt, and other unquoted debt instruments holding cannot exceed 10
percent in the case of growth funds and 40 percent in the case of income funds.
Distribution:

Mutual funds are required to distribute at least 90 percent of their profits annually in
any given year. Besides these, there are guidelines governing the operations of mutual
funds in dealing with shares and also seeking to ensure greater investor protection
through detailed disclosure and reporting by the mutual funds. SEBI has also been
granted with powers to over see the constitution as well as the operations of mutual
funds, including a common advertising code. Besides, SEBI can impose penalties on
Mutual funds after due investigation for their failure to comply with the guidelines.
MUTUAL FUND—TYPES
1. OPEN-ENDED MUTUAL FUNDS:-

The holders of the shares in the Fund can resell them to the issuing Mutual Fund
company at the time. They receive in turn the net assets value (NAV) of the shares at
the time of re-sale. Such Mutual Fund Companies place their funds in the secondary
securities market. They do not participate in new issue market as do pension funds or
life insurance companies. Thus they influence market price of corporate securities.
Open-end investment companies can sell an unlimited number of Shares and thus
keep going larger. The open-end Mutual Fund Company Buys or sells their shares.
These companies sell new shares NAV plus a Loading or management fees and redeem
shares at NAV. In other words, the target amount and the period both are indefinite in
such funds.
2. CLOSED-ENDED MUTUAL FUNDS:-

A closed–end Fund is open for sale to investors for a specific period, after which
further sales are closed. Any further transaction for buying the units or repurchasing
them, Happen in the secondary markets, where closed end Funds are listed. Therefore
new investors buy from the existing investors, and existing investors can liquidate
their units by selling them to other willing buyers. In a closed end Funds, thus the pool
of Funds can technically be kept constant. The asset management company (AMC)

however, can buy out the units from the investors, in the secondary markets, thus
reducing the amount of funds held by outside investors. The price at which units can
be sold or redeemed Depends on the market prices, which are fundamentally linked to
the NAV. Investors in closed end Funds receive either certificates or Depository
receipts, for their holdings in a closed end mutual Fund.
MUTUAL FUND SCHEME TYPES
Equity Diversified Schemes:-
These schemes mainly invest in equity. They seek to achieve long-term capital
appreciation by responding to the dynamically changing Indian economy by moving
across sectors such as Lifestyle, Pharma, Cyclical, Technology, etc.
♦ Sector Schemes:-
These schemes focus on particular sector as IT, Banking, etc. They seek to generate
long-term capital appreciation by investing in equity and related securities of
companies in that particular sector.
♦ Index Schemes:-
These schemes aim to provide returns that closely correspond to the return of a
particular stock market index such as BSE Sensex, NSE Nifty, etc. Such schemes
invest in all the stocks comprising the index in approximately the same weightage as
they are given in that index.
♦ Exchange Traded Funds (ETFs):-

ETFs invest in stocks underlying a particular stock index like NSE Nifty or BSE Sensex.
They are similar to an index fund with one crucial difference. ETFs are listed and
traded on a stock exchange. In contrast, an index fund is bought and sold by the fund
and its distributors.
♦ Equity Tax Saving Schemes:-
These work on similar lines as diversified equity funds and seek to achieve long-term
capital appreciation by investing in the entire universe of stocks. The only difference
between these funds and equity-diversified funds is that they demand a lock-in of 3
years to gain tax benefits.
♦ Dynamic Funds:-
These schemes alter their exposure to different asset classes based on the market
scenario. Such funds typically try to book profits when the markets are overvalued and
remain fully invested in equities when the markets are undervalued. This is suitable for
investors who find it difficult to decide when to quit from equity.
♦ Balanced Schemes:-
These schemes seek to achieve long-term capital appreciation with stability of

investment and current income from a balanced portfolio of high quality equity and
fixed-income securities.
♦ Debt Schemes:-
These schemes basically invest in debt.
♦ Medium-Term Debt Schemes:-
These schemes have a portfolio of debt and money market instruments where the
average maturity of the underlying portfolio is in the range of five to seven years.
♦ Short-Term Debt Schemes

These schemes have a portfolio of debt and money market instruments where the
average maturity of the underlying portfolio is in the range of one to two years.
♦ Money Market Debt Schemes:-

These schemes invest in debt securities of a short-term nature, which generally means
securities of less than one-year maturity. The typical short-term interest-bearing
instruments these funds invest in Treasury Bills, Certificates of Deposit, Commercial
Paper and Inter-Bank Call Money Market.
♦ Medium-Term Gilt Schemes:-
These schemes invest in government securities. The average maturity of the securities
in the scheme is over three years.
♦ Short-Term Gilt Schemes:-
These schemes invest in government securities. The securities invested in are of short to
medium term maturities.
♦ Floating Rate Funds:-
They invest in debt securities with floating interest rates, which are generally linked to
some benchmark rate like MIBOR. Floating rate funds have a high relevance when
interest rates are on the rise helping investors to ride the interest rate rise.
♦ Monthly Income Plans (MIPS):-

These are basically debt schemes, which make marginal investments in the range of 10-
25% in equity to boost the scheme’s returns. MIP schemes are ideal for investors who
seek slightly higher return that pure long-term debt schemes at marginally higher risk.
DIFFERENT MODES OF RECEIVING THE INCOME EARNED FROM

MUTUAL FUND INVESTMENTS
Mutual Funds offer three methods of receiving income:

♦ Growth Plan:-
In this plan, dividend is neither declared nor paid out to the investor but is built into
the value of the NAV. In other words, the NAV increases over time due to such
incomes and the investor realizes only the capital appreciation on redemption of his
investment.
♦ Income Plan:-
In this plan, dividends are paid-out to the investor. In other words, the NAV only
reflects the capital appreciation or depreciation in market price of the underlying
portfolio.
♦ Dividend Re-investment Plan
In this case, dividend is declared but not paid out to the investor, instead, it is
reinvested back into the scheme at the then prevailing NAV. In other words, the
investor is given additional units and not cash as dividend.
MUTUAL FUND INVESTING STRATEGIES
1. Systematic Investment Plans (SIPs)
These are best suited for young people who have started their careers and need to
build their wealth. SIPs entail an investor to invest a fixed sum of money at regular
intervals in the Mutual fund scheme the investor has chosen, an investor opting for SIP
in xyz Mutual Fund scheme will need to invest a certain sum on money every
month/quarter/half-year in the scheme.
2. Systematic Withdrawal Plans (SWPs)

These plans are best suited for people nearing retirement. In these plans, an investor
invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money at
regular intervals to take care of his expenses
3. Systematic Transfer Plans (STPs)
They allow the investor to transfer on a periodic basis a specified amount from one
scheme to another within the same fund family – meaning two schemes belonging to
the same mutual fund. A transfer will be treated as redemption of units from the
scheme from which the transfer is made. Such redemption or investment will be at the
applicable NAV. This service allows the investor to manage his investments actively to
achieve his objectives. Many funds do not even charge any transaction fees for his
service – an added advantage for the active investor.
MUTUAL FUNDS—RISK ASSOCIATED
Investing in Mutual Funds, as with any security, does not come without risk. One of
the most basic economic principles is that risk and reward are directly correlated. In
other words, the greater the potential risk the greater the potential return. The types
of risk commonly associated with Mutual Funds are:
1) MARKET RISK:-
Market risk relates to the market value of a security in the future. Market prices
fluctuate and are susceptible to economic and financial trends, supply and demand,
and many other factors that cannot be precisely predicted or controlled.
2) POLITICAL RISK:-
Changes in the tax laws, trade regulations, administered prices, etc are some of the
many political factors that create market risk. Although collectively, as citizens, we
have indirect control through the power of our vote individually, as investors, we have
virtually no control.

3) INFLATION RISK:-
Interest rate risk relates to future changes in interest rates. For instance, if an investor
invests in a long-term debt Mutual Fund scheme and interest rates increase, the NAV
of the scheme will fall because the scheme will be end up holding debt offering lower
interest rates.
4) BUSINESS RISK:-
Business risk is the uncertainty concerning the future existence, stability, and
profitability of the issuer of the security. Business risk is inherent in all business
ventures. The future financial stability of a company cannot be predicted or
guaranteed, nor can the price of its securities. Adverse changes in business
circumstances will reduce the market price of the company’s equity resulting in
proportionate fall in the NAV of the Mutual Fund scheme, which has invested in the
equity of such a company.
5) ECONOMIC RISK:-
Economic risk involves uncertainty in the economy, which, in turn, can have an
adverse effect on a company’s business. For instance, if monsoons fail in a year,
equity stocks of agriculture-based companies will fall and NAVs of Mutual Funds, which
have invested in such stocks, will fall proportionately.

PERFORMANCE MEASURES OF MUTUAL FUNDS
Mutual Fund industry today, with about 40 players and more than six hundred
schemes, is one of the most preferred investment avenues in India. However, with a
plethora of schemes to choose from, the retail investor faces problems in selecting
funds. Factors such as investment strategy and management style are qualitative, but
the funds record is an important indicator too.
Though past performance alone cannot be indicative of future performance, it is,

frankly, the only quantitative way to judge how good a fund is at present. Therefore,
there is a need to correctly assess the past performance of different Mutual Funds.
Worldwide, good Mutual Fund companies over are known by their AMC’s and this fame
is directly linked to their superior stock selection skills.
For Mutual Funds to grow, AMC’s must be held accountable for their selection of
stocks. In other words, there must be some performance indicator that will reveal the
quality of stock selection of various AMC’s.

Return alone should not be considered as the basis of measurement of the
performance of a Mutual Fund scheme, it should also include the risk taken by the fund
manager because different funds will have different levels of risk attached to them.
Risk associated with a fund, in a general, can be defined as Variability or fluctuations
in the returns generated by it. The higher the fluctuations in the returns of a fund
during a given period, higher will be the risk associated with it. These fluctuations in
the returns generated by a fund are resultant of two guiding forces. First, general
market fluctuations, which affect all the securities, present in the market, called
Market risk or Systematic risk and second, fluctuations due to specific securities
present in the portfolio of the fund, called Unsystematic risk. The Total Risk of a given
fund is sum of these two and is measured in terms of standard deviation of returns of
the fund.
Systematic risk, on the other hand, is measured in terms of Beta, which represents
fluctuations in the NAV of the fund vis-à-vis market. The more responsive the NAV of a
Mutual Fund is to the changes in the market; higher will be its beta. Beta is calculated
by relating the returns on a Mutual Fund with the returns in the market. While
Unsystematic risk can be diversified through investments in a number of instruments,
systematic risk cannot. By using the risk return relationship, we try to assess the
competitive strength of the Mutual Funds one another in a better way. In order to
determine the risk-adjusted returns of investment portfolios, several eminent authors
have worked since 1960s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class.
The most important and widely used measures of performance are:
• The Treynor’Measure
• The Sharpe Measure
• Jenson Model
• Fama Model
The Treynor Measure:-

Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above
risk free rate of return (generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given period and
systematic risk associated with it (beta). Symbolically, it can be represented as:
Treynor's Index (Ti) = (Ri - Rf)/Bi.
Where,
Ri represents return on fund,
Rf is risk free rate of return, and
Bi is beta of the fund.
All risk-averse investors would like to maximize this value. While a high and positive
Treynor's Index shows a superior risk-adjusted performance of a fund, a low and
negative Treynor's Index is an indication of unfavorable performance.
The Sharpe Measure :-
In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which
is a ratio of returns generated by the fund over and above risk free rate of return and
the total risk associated with it.
According to Sharpe, it is the total risk of the fund that the investors are concerned
about. So, the model evaluates funds on the basis of reward per unit of total risk.
Symbolically, it can be written as:
Sharpe Index (Si) = (Ri - Rf)/Si
Where,
Si is standard deviation of the fund,
Ri represents return on fund, and
Rf is risk free rate of return.

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of
a fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.
Comparison of Sharpe and Treynor
Sharpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. The total risk is appropriate when we are
evaluating the risk return relationship for well-diversified portfolios. On the other hand,
the systematic risk is the relevant measure of risk when we are evaluating less than
fully diversified portfolios or individual stocks. For a well-diversified portfolio the total
risk is equal to systematic risk. Rankings based on total risk (Sharpe measure) and
systematic risk (Treynor measure) should be identical for a well-diversified portfolio,
as the total risk is reduced to systematic risk. Therefore, a poorly diversified fund that
ranks higher on Treynor measure, compared with another fund that is highly
diversified, will rank lower on Sharpe Measure.
Jenson Model:-
Jenson's model proposes another risk adjusted performance measure. This measure
was developed by Michael Jenson and is sometimes referred to as the differential
Return Method. This measure involves evaluation of the returns that the fund has
generated vs. the returns actually expected out of the fund1 given the level of its
systematic risk. The surplus between the two returns is called Alpha, which measures
the performance of a fund compared with the actual returns over the period. Required
return of a fund at a given level of risk (Bi) can be calculated as:
Ri = Rf + Bi (Rm - Rf)
Where,
Ri represents return on fund, and
Rm is average market return during the given period,
Rf is risk free rate of return, and
Bi is Beta deviation of the fund.

After calculating it, Alpha can be obtained by subtracting required return from
the actual return of the fund. Higher alpha represents superior performance of the
fund and vice versa. Limitation of this model is that it considers only systematic risk
not the entire risk associated with the fund and an ordinary investor cannot mitigate
unsystematic risk, as his knowledge of market is primitive.
Fama Model:-
The Eugene Fama model is an extension of Jenson model. This model compares the
performance, measured in terms of returns, of a fund with the required return
commensurate with the total risk associated with it. The difference between these two
is taken as a measure of the performance of the fund and is called Net Selectivity.
The Net Selectivity represents the stock selection skill of the fund manager, as it is the
excess returns over and above the return required to compensate for the total risk
taken by the fund manager. Higher value of which indicates that fund manager has
earned returns well above the return commensurate with the level of risk taken by
him.
Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)
Where,
Ri represents return on fund,
Sm is standard deviation of market returns,
Rm is average market return during the given period, and
Rf is risk free rate of return.
The Net Selectivity is then calculated by subtracting this required return from
the actual return of the fund.
Among the above performance measures, two models namely, Treynor measure and
Jenson model use Systematic risk is based on the premise that the Unsystematic risk is
diversifiable. These models are suitable for large investors like institutional investors
with high risk taking capacities as they do not face paucity of funds and can invest in a
number of options to dilute some risks. For them, a portfolio can be spread across a
number of stocks and sectors. However, Sharpe measure and Fama model that consider
the entire risk associated with fund are suitable for small investors, as the ordinary
investor lacks the necessary skill and resources to diversify. Moreover, the selection of
the fund on the basis of superior stock selection ability of the fund manager will also
help in safeguarding the money invested to a great extent. The investment in funds that
have generated big returns at higher levels of risks leaves the money all the more prone
to risks of all kinds that may exceed the individual investors' risk appetite.
Mutual Fund Companies in India
The concept of mutual funds in India dates back to the year 1963. The era between
1963 and 1987 marked the existance of only one mutual fund company in India with \
67bn assets under management (AUM), by the end of its monopoly era, the Unit Trust
of India (UTI). By the end of the 80s decade, few other mutual fund companies in India
took their position in mutual und market. The new entries of mutual fund companies in
India were SBI Mutual Fund, Canbank Mutual Fund, Punjab National Bank Mutual Fund,
Indian Bank Mutual Fund, Bank of India Mutual Fund.
The succeeding decade showed a new horizon in indian mutual fund industry. By the
end of 1993, the total AUM of the industry was \ 470.04 bn. The private sector funds
started penetrating the fund families. In the same year the first Mutual Fund Regulations
came into existance with re-registering all mutual funds except UTI. The regulations
were further given a revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company in India which has now
merged with Franklin Templeton. Just after ten years with private sector players
penetration, the total assets rose up to \ 1218.05 bn. Today there are 40 mutual fund
companies in India.

MUTUAL FUNDS- DO’s and DONT’s
We all have come across ads which say that “Mutual Funds are subject to market risk,
please read the offer document carefully before investing”. Likewise there are many do’s
and dont’s one has to keep in mind before getting into investing in mutual funds. The
following points might help one to optimize his/her investment decision—
Assess yourself:
Self-assessment of one’s needs; expectations and risk profile is of prime importance

failing which; one will make more mistakes in putting money in right places than
otherwise. One should identify the degree of risk bearing capacity one has and also
clearly state the expectations from the investments. Irrational expectations will only
bring pain.
Try to understand where the money is going:
It is important to identify the nature of investment and to know if one is compatible

with the investment. One can lose substantially if one picks the wrong kind of mutual
fund. In order to avoid any confusion it is better to go through the literature such as
offer document and fact sheets that mutual fund companies provide on their funds.
Don't rush in picking funds, think first:

One first has to decide what he wants the money for and it is this investment goal that
should be the guiding light for all investments done. It is thus important to know the
risks associated with the fund and align it with the quantum of risk one is willing to take.
One should take a look at the portfolio of the funds for the purpose. Excessive exposure
to any specific sector should be avoided, as it will only add to the risk of the entire
portfolio. Mutual funds invest with a certain ideology such as the "Value Principle" or
"Growth Philosophy". Both have their share of critics but both philosophies work for
investors of different kinds. Identifying the proposed investment philosophy of the fund
will give an insight into the kind of risks that it shall be taking in future.
Invest. Don’t speculate:
A common investor is limited in the degree of risk that he is willing to take. It is thus of
key importance that there is thought given to the process of investment and to the time
horizon of the intended investment. One should abstain from speculating which in other
words would mean getting out of one fund and investing in another with the intention of
making quick money. One would do well to remember that nobody can perfectly time
the market so staying invested is the best option unless there are compelling reasons to
exit.
Don’t put all the eggs in one basket:
This old age adage is of utmost importance. No matter what the risk profile of a person
is, it is always advisable to diversify the risks associated. So putting one’s money in
different asset classes is generally the best option as it averages the risks in each
category. Thus, even investors of equity should be judicious and invest some portion of
the investment in debt. Diversification even in any particular asset class (such as equity,
debt) is good. Not all fund managers have the same acumen of fund management and
with identification of the best man being a tough task, it is good to place money in the
hands of several fund managers. This might reduce the maximum return possible, but
will also reduce the risks.
Be regular:
Investing should be a habit and not an exercise undertaken at one’s wishes, if one has
to really benefit from them. As we said earlier, since it is extremely difficult to know

when to enter or exit the market, it is important to beat the market by being
systematic. The basic philosophy of Rupee cost averaging would suggest that if one
invests regularly through the ups and downs of the market, he would stand a better
chance of generating more returns than the market for the entire duration. The SIPs
(Systematic Investment Plans) offered by all funds helps in being systematic. All that
one needs to do is to give post-dated cheques to the fund and thereafter one will not be
harried later. The Automatic investment Plans offered by some funds goes a step
further, as the amount can be directly/electronically transferred from the account of the
investor.
Find the right funds:
Finding funds that do not charge much fees is of importance, as the fee charged
ultimately goes from the pocket of the investor. This is even more important for debt
funds as the returns from these funds are not much. Funds that charge more will reduce
the yield to the investor. Finding the right funds is important and one should also use
these funds for tax efficiency. Investors of equity should keep in mind that all dividends
are currently tax-free in India and so their tax liabilities can be reduced if the dividend
payout option is used. Investors of debt will be charged a tax on dividend distribution
and so can easily avoid the payout options.
Keep track of your investments:
Finding the right fund is important but even more important is to keep track of the way
they are performing in the market. If the market is beginning to enter a bearish phase,
then investors of equity too will benefit by switching to debt funds as the losses can be
minimized. One can always switch back to equity if the equity market starts to show
some buoyancy.
Know when to sell your mutual funds:
Knowing when to exit a fund too is of utmost importance. One should book profits
immediately when enough has been earned i.e. the initial expectation from the fund has
been met with. Other factors like non-performance, hike in fee charged and change in
any basic attribute of the fund etc. are some of the reasons for to exit. For more on it,
read "When to say goodbye to your mutual fund."

FUTURE OF MUTUAL FUND INDUSTRY IN INDIA
Why Invest in Gold?
Historically, gold has been a proven method of preserving value when a national
currency was losing value. If your investments are valued in a depreciating currency,
allocating a portion to gold assets is similar to a financial insurance policy. In the past
year, the climb in the price of gold above $700 per ounce is due to many factors, one
being that the dollar is losing value.
Reasons favoring to invest to Gold
* The dollar is weak and getting weaker due to national economic policies which don't
appear to have an end.
* Gold price appreciation makes up for lost interest, especially in a bull market.
* The last four years are the beginning of a major bull move similar to the 70's when
gold moved from $38 to over $800.
* Central banks in several countries have stated their intent to increase their gold
holdings instead of selling.
* All gold funds are in a long term uptrend with bullion, most recently setting new all-
time highs.

* The trend of commodity prices to increase is relative to gold price increases.
* Worldwide gold production is not matching consumption. The price will go up with
demand.
* Most gold consumption is done in India and China and their demand is increasing with
their increase in national wealth.
* Several gold funds reached all-time highs in 2010 and are still trending upward.
* The short position held by hedged gold funds is being methodically reduced.
Gold Mutual funds
A relatively safe method of buying and owning gold stocks allows the owner to diversify
among many stocks and allows the investing decisions to be made by a professional.
Investment methods vary among funds and provide many different styles of portfolio
management for an investor to choose from. Prices move faster and further in both
directions than the price of gold.
* Provide professional management and diversification within the gold sector.
* Are more volatile than the S&P index.
* May or may not have any correlation with the general market.
* Move daily with the price of gold, but not always.
* Move proportionally more than gold, up and down.
* If you believe in 'buy low, sell high', gold is still low, but climbing.
The real estate sector and the road ahead
Real Estate Mutual Funds ('REMFs')
The SEBI Board has now approved the guidelines for the much awaited Real Estate
Mutual Funds. "Real Estate Mutual Fund Scheme" is defined to mean a scheme of a
mutual fund which has investment objective to invest directly or indirectly in real estate
property.

Governing Law
It is proposed that REMFs will be governed by the provisions and guidelines issued under
SEBI (Mutual Funds) Regulations. REMFs, shall initially, be close ended. The units of
REMFs shall be compulsorily listed on the Stock Exchanges and Net Asset Value (NAV) of
the scheme shall be declared daily.
Custodian
The REMFs would be required to appoint a Custodian who has been granted a Certificate
of Registration to carry on the business of Custodian of securities by the SEBI Board.
The custodian would safe keep the title of real estate properties held by the REMFs.
Investment Criterion:
It is proposed that REMFs could invest in the following: -
* Directly in real estate properties within India;
* Mortgage (housing lease) backed securities;
* Equity shares / Bonds / Debentures of listed / unlisted companies which deal in

properties and also undertake property development; and in
* Other securities.

Role of ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)
With the increase in mutual fund players in India, a need for mutual fund association in
India was generated to function as a non-profit organization. Association of Mutual
Funds in India (AMFI) was incorporated on 22nd August 1995.
AMFI is an apex body of all Asset Management Companies (AMC) which has been
registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes
are its members. It functions under the supervision and guidelines of its Board of
Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to
a professional and healthy market with ethical lines enhancing and maintaining
standards. It follows the principle of both protecting and promoting the interests of
mutual funds as well as their unit holders.
The Association of Mutual Funds of India works with 43 registered AMCs of the country.
It has certain defined objectives which juxtaposes the guidelines of its Board of
Directors.

The objectives are as follows:
This mutual fund association of India maintains a high professional and ethical standard
in all areas of operation of the industry.
♦ It also recommends and promotes the top class business practices and code of
conduct which is followed by members and related people engaged in the
activities of mutual fund and asset management. The agencies who are by any
means connected or involved in the field of capital markets and financial
services also involved in this code of conduct of the association.
♦ AMFI interacts with SEBI and works according to SEBIs guidelines in the
mutual fund industry.
♦ Association of Mutual Fund of India does represent the Government of India,

the Reserve Bank of India and other related bodies on matters relating to the
Mutual Fund Industry.
♦ It develops a team of well qualified and trained Agent distributors. It

implements a programme of training and certification for all intermediaries and
other engaged in the mutual fund industry.
♦ AMFI undertakes all India awareness programme for investors in order to
promote proper understanding of the concept and working of mutual funds.
♦ At last but not the least association of mutual fund of India also disseminate
information on Mutual Fund Industry and undertakes studies and research
either directly or in association with other bodies.
With effect from June 1, 2010 AMFI Mutual Fund Certification program is discontinued.
Accordingly, test for AMFI Mutual Fund (Basic) Module and AMFI Mutual Fund (Advisors)
Module will not be conducted from June 1, 2010. National Institute of Securities Markets
(NISM) would be conducting Mutual Fund Distributors Certification Examination from
June 1, 2010 onwards.
AMFI Refresher Course stands discontinued with effect from June 1, 2010. Consequently
the mandate given to Indian Institute of Capital Markets (IICM) and Centre for
Education and Learning (CIEL) by AMFI for conducting Refresher Course stands
withdrawn. NISM is conducting 'Continuing Professional Education' (CPE) Program for
Mutual Fund Distributors from June 1, 2010.

SEBI guidelines for mutual fund
Mutual funds cannot invest more than 10 per cent of the total net assets of a scheme in
the short-term deposits of a single bank, the Securities and Exchange Board of India.
Announcing guidelines for parking of funds in short-term deposits of scheduled

commercial banks (SCBs) by mutual funds, the regulator said that investment cap would
also take into account the deposit schemes of the bank's subsidiaries.
The Sebi has also defined 'short term' for funds' investment purposes as a period not
exceeding 91 days.
Besides, the parking of funds in short-term deposits of all SCBs has been capped at 15
per cent of the net asset value (NAV) of a scheme, which can be raised to 20 per cent
with prior approval of the trustees.
The parking of funds in short-term deposits of associate and sponsor SCBs together
should not exceed 20 per cent of total deployment by the MF in short-term deposits, it
added.
The Sebi said that these guidelines are aimed at ensuring that funds collected in a
scheme are invested as per the investment objective stated in the offer document of an
MF scheme.
The new guidelines would be applicable to all fresh investments whether in a new
scheme or an existing one. In cases of an existing scheme, where the scheme has

already parked funds in short-term deposits, the asset management company have
been given three-months time to conform with the new guidelines.
The Sebi has also asked the trustees of a fund to ensure that no funds are parked by a
scheme in short term deposit of a bank, which has invested in that particular scheme.
The Sebi guidelines say that asset management companies (AMCs) shall not be
permitted to charge any investment and advisory fees for parking of funds in short-term
deposits of banks in case of liquid and debt-oriented schemes.
What are the new SEBI guidelines all about?
Relevant extract of the SEBI circular released on June 30, 2009 (SEBI/IMD/CIR
No. 4/168230/09) is as follows:
'In order to empower the investors in deciding the commission paid to distributors in
accordance with the level of service received, to bring about more transparency in
payment of commissions and to incentivise long term investment, it has been decided
that:
There shall be no entry load for all mutual fund schemes
The scheme application forms shall carry a suitable disclosure to the effect that
the upfront commission to distributors will be paid by the investor directly to the
distributor, based on his assessment of various factors including the service
rendered by the distributor
Of the exit load or CDSC charged to the investor, a maximum of 1% of the
Redemption proceeds shall be maintained in a separate account which can be used

by the AMC to pay commissions to the distributor and to take care of other
marketing and selling expenses. Any balance shall be credited to the scheme
immediately

The distributors should disclose all the commissions (in the form of trail
commission or any other mode) payable to them for the different competing
schemes of various mutual funds from amongst which the scheme is being
recommended to the investor.
This circular shall be applicable for :
Investments in mutual fund schemes (including additional purchases and
switch-in to a scheme from other schemes) with effect from August 1, 2009
Redemptions from mutual fund schemes (including switch-out from other
schemes) with effect from August 1, 2009
New mutual fund schemes launched on and after August 1, 2009; and
Systematic Investment Plans (SIPs) registered on or after August 1, 2009'
ULIPs vs Mutual Funds
ULIP MUTUAL FUND
Minimum investment
INVESTMENT Determined by the
amounts are
investor and can be
AMOUNTS determined by the fund
modified as well
house
No upper limits, Upper limits for

expenses determined expenses chargeable to
EXPENSES
by the insurance investors have been
company set by the regulator
PORTFOLIO Quarterly disclosures

Not mandatory
DISCLOSURE are mandatory
MODIFYING Generally permitted for Entry/exit loads have

ASSESTS free or at a nominal to be borne by the
ALLOCATION cost investor
TAX BENEFITS Section 80C benefits Section 80C benefits

are available only on
are available on all
investments in tax-
ULIP investments
saving funds
GROWTH IN ASSETS UNDER MANAGEMENT

Latest Average Asset Under Management for all Mutual Fund houses, increase or decrease in
corpus, sales & redemption figures..
Amount in \ Crores
No. of
Mutual Fund Name Asset Under Management
Schemes*
Net inc/dec
As on Corpus As on Corpus
in corpus
AIG Global Investment 44 Jun 30, 1,014.66 May 31, 1,030.86 -16.202
Group Mutual Fund 2010 2010
60 Jun 30, 2,999.19 May 31, 4,715.89 -1716.705
Axis Mutual Fund
2010 2010
Baroda Pioneer Mutual 31 Jun 30, 3,075.20 May 31, 4,759.53 -1684.337
Fund 2010 2010
17 Jun 30, 2,250.37 May 31, 2,263.15 -12.779
Benchmark Mutual Fund
2010 2010
45 Jun 30, 692.74 May 31, 724.17 -31.426
Bharti AXA Mutual Fund
2010 2010
217 Jun 30, 63,111.55 May 31, 73,828.03 -10716.484
Birla Sun Life Mutual Fund
2010 2010
89 Jun 30, 8,533.44 May 31, 10,661.95 -2128.507
Canara Robeco Mutual Fund
2010 2010
116 Jun 30, 9,016.87 May 31, 10,102.46 -1085.587
Deutsche Mutual Fund
2010 2010
98 Jun 30, 21,415.75 May 31, 21,884.95 -469.201
DSP Blackrock Mutual Fund
2010 2010
41 Jun 30, 282.76 May 31, 261.09 21.673
Edelweiss Mutual Fund
2010 2010
Escorts Mutual Fund 30 Jun 30, 195.50 May 31, 198.23 -2.729

2010 2010
61 Jun 30, 7,878.87 May 31, 7,457.84 421.031
Fidelity Mutual Fund
2010 2010
111 Jun 30, 5,162.39 May 31, 7,537.44 -2375.053
Fortis Mutual Fund
2010 2010
Franklin Templeton Mutual 172 Jun 30, 34,563.92 May 31, 35,774.79 -1210.867
Fund 2010 2010
173 Jun 30, 86,648.10 May 31, 101,863.31 -15215.214
HDFC Mutual Fund
2010 2010
84 Jun 30, 5,353.19 May 31, 5,851.11 -497.918
HSBC Mutual Fund
2010 2010
ICICI Prudential Mutual 328 Jun 30, 73,795.43 May 31, 87,709.81 -13914.385
Fund 2010 2010
6 Jun 30, 28.18 - - -

IDBI Mutual Fund
2010
173 Jun 30, 20,965.76 May 31, 26,614.77 -5649.013
IDFC Mutual Fund
2010 2010
92 Jun 30, 1,495.47 May 31, 1,645.42 -149.951
ING Mutual Fund
2010 2010
90 Jun 30, 5,657.99 May 31, 8,950.43 -3292.441
JM Financial Mutual Fund
2010 2010
31 Jun 30, 4,030.79 May 31, 3,784.98 245.816
JP Morgan Mutual Fund
2010 2010
Kotak Mahindra Mutual 123 Jun 30, 28,540.87 May 31, 40,657.52 -12116.648
Fund 2010 2010
66 Jun 30, 3,693.42 May 31, 5,170.69 -1477.279
L&T Mutual Fund
2010 2010
62 Jun 30, 30,049.38 May 31, 38,962.82 -8913.437
LIC Mutual Fund
2010 2010
37 Jun 30, 252.13 May 31, 236.50 15.633
Mirae Asset Mutual Fund
2010 2010
Morgan Stanley Mutual 11 Jun 30, 2,256.80 May 31, 2,253.67 3.128
Fund 2010 2010
20 Jun 30, 921.26 May 31, 823.38 97.876
Peerless Mutual Fund
2010 2010
84 Jun 30, 6,827.97 May 31, 7,647.76 -819.785
PRINCIPAL Mutual Fund
2010 2010
11 Jun 30, 101.04 May 31, 101.72 -0.685
Quantum Mutual Fund
2010 2010
193 Jun 30, 101,320.15 May 31, 118,973.14 -17652.99
Reliance Mutual Fund
2010 2010
92 Jun 30, 10,918.47 May 31, 15,464.10 -4545.625
Religare Mutual Fund
2010 2010
44 Jun 30, 741.62 May 31, 765.23 -23.614
Sahara Mutual Fund
2010 2010

116 Jun 30, 33,733.39 May 31, 36,235.76 -2502.377
SBI Mutual Fund
2010 2010
11 Jun 30, 273.08 May 31, 323.71 -50.627
Shinsei Mutual Fund
2010 2010
Sundaram BNP Paribas 138 Jun 30, 12,717.49 May 31, 13,976.11 -1258.621
Mutual Fund 2010 2010
169 Jun 30, 18,464.10 May 31, 22,673.43 -4209.33
Tata Mutual Fund
2010 2010
49 Jun 30, 2,438.65 May 31, 3,056.16 -617.506
Taurus Mutual Fund
2010 2010
212 Jun 30, 64,445.65 May 31, 78,617.15 -14171.505
UTI Mutual Fund
2010 2010
* indicates currently in operation
MUTUAL FUND DATA FOR THE MONTH ENDED - JUN 30 , 2010
Amount in \ Crores
No. of
new
schemes
Redem-
Category launched Sales Asset Under Management
ption
during
the
month
New Existing Total Total as on as on Inflow/
schemes schemes Jun 30 , May 31 , Outflow
2010 2010
Bank
B 4 732 106079 106811 127239 109815 130275 -20460
Sponsored
C Institutions 0 0 68385 68385 79151 30049 38963 -8914
Private Sector & Joint Venture :
Indian 14 1997 214500 216497 253087 208508 260790 -52282
Predominantly
11 4357 221387 225744 273178 257689 299262 -41573
Indian
D
Predominantly
0 0 24009 24009 26168 20931 22231 -1300
Foreign
Grand Total
29 7086 634360 641446 758823 626992 751521 -124529
(B+C+D)

ASSETS UNDER MANAGEMENT AS
ON JUNE 30, 2010
Amount in \ Crores
Structure
Nature Open Close
Total
End End
Balanced 16540 1356 17896
ELSS 21739 3129 24868
FOF Investing
2638 - 2638
Overseas
Gilt 3229 - 3229
GOLD ETF 1939 - 1939
Growth 161850 16350 178200
Income 274647 36868 311515
Liquid/Money
71871 - 71871
Market
Other ETF 1135 - 1135
Total 555588 57703 613291
Today there are over 40 AMC’s offering a huge number of schemes giving the investor a
huge horizon to choose from. The market has become very competitive with the
companies fighting tooth and nail to attract and keep the investor from investing in their
competitor’s schemes. Today, Reliance Mutual Funds is the leading company in this
sector with total assets under management being \101,320.15 Crores. While HDFC being
in the second position with \ 86,648.10 Crores.
BCG Report on Equity MF
BCG
- Boston Consulting Group is a Global Management Consulting group
- World's leading Advisor on Business Strategy
- Founded in 1963, has presence in 40 countries with 69 offices
The Report
- Study done by BCG on Equity MF industry in colaaboration with CAMS
- Based on detailed analysis of Equity MF data of CAMS from 2003-2010
- Group discussions done with IFAs in various cities for the report
- Purpose of the report to track direction of Equity MF industry and recommend new
themes for future course
Numbers from the report
- MF investments as % of household savings have increased from 1.1% in 1994 to

7.9% in 2008
- 90% of investment comes from ticket size of less than 1 Lac
- Inflows from SIP have gown from 2% in 2005 to 15% in 2009
- Share of top 10 cities in business has reduced from 90% in 2003 to 74% in 2010
Mumbai & delhi account for 45% of Total AUM

Growth of Equity AUM
Citywise Split of Customer type

Outside top10 Cities, around 80% of AUM is contributed by Retail investors
MF penetration almost negligible outside top 30 cities
REDEMPTION ANALYSIS: APRIL 2008-MARCH 2010
IS: A87% of retail investors(<1 lac) have redeemed at profit
SIP GAINING MARKETING SHARE CONTINUOUSLY

GAI
NSIP inflows as a % of total inflows are now 19% With 97% of SIP in electronic mode,
SIP is becoming preferred mode of investment
ING M
ELSS INFLOW
ELSS is a highly popular product and one of the fastest growing product categories
outside top 10 cities
FUTURE COURSE OF IFAs

RCH 2010
CITY TIERWISE DISTRIBUTION OF OTHER FINANCIAL PRODUCTS
Comparison of city tiers in urban India (2005-06)
The Bottom 5000 cities contribute 49% of Savings Deposits and 35% of LI premium, but
less than 1% of Equity AUM.
MF industry skewed towards top 30 cities. (These cities contribute 96% of AUM)

- The Equity MF industry is poised for a strong growth ahead
- The retail penetration for the product is still low
- SIP & ELSS are going to be 2 focus products for growth in the market
- Huge untapped opportunity for Mutual Fund industry outside the Top 20 cities
- AMCs have to work on innovative products and efficient marketing plans to reach
out to maximum customers
- IFAs have to adapt to new scenario and change their value proposition to the
investors
IERWISE DISTRIBUTION OF
OTHER FINANCIAL PRODUCTS

Performance Comparison of Different Mutual funds in India
TOP 10 - EQUITY FUNDS - PERIOD (LAST 12 MONTHS)
Rank Scheme Name Date NAV Last 12

(\) Months %
1 Reliance Pharma Fund - Growth Aug 2 , 2010 52.3031 84.2481
2 Franklin Pharma Fund - Growth Aug 2 , 2010 57.503 69.4777
3 Religare Mid N Small Cap Fund - Growth Aug 2 , 2010 14.32 58.2766
4 UTI Growth Sector Fund - Pharma and Aug 2 , 2010 36.11 57.3631
Healthcare - Growth
5 Reliance Equity Opportunities Fund - Aug 2 , 2010 34.5871 57.2405
Growth
6 DSP BlackRock Small and Midcap Fund - Aug 2 , 2010 17.449 56.5587
Growth
7 UTI Master Value Fund - Growth Aug 2 , 2010 51.33 55.1714
8 SBI Magnum Sector Umbrella - Emerging Aug 2 , 2010 40.37 54.4248
Businesses Fund - Growth
9 Reliance Banking Fund - Growth Aug 2 , 2010 96.5722 53.3597
10 ING Dividend Yield Fund - Growth Aug 2 , 2010 22.84 53.239
*Note:- Returns calculated for less than 1 year are Absolute returns and returns
calculated for more than 1 year are compounded annualized.
TOP 10 -DEBT FUNDS - PERIOD (LAST 12 MONTHS)

( \) Months %
1 HDFC Multiple Yield Fund - Plan 2005 - Aug 2 , 2010 15.6995 16.0704
Growth
2 Reliance Monthly Income Plan - Growth Aug 2 , 2010 20.9161 13.4424
3 HDFC Monthly Income Plan - Long Term Aug 2 , 2010 22.0101 13.3122
Plan - Growth
4 HDFC Multiple Yield Fund - Growth Aug 2 , 2010 17.1464 13.027
5 Escorts Income Bond - Growth Aug 2 , 2010 25.8844 12.8519
6 HSBC MIP - Savings Plan - Growth Aug 2 , 2010 18.836 10.9224
7 Fortis Fixed Term Plan - Series 13 - Plan D Aug 2 , 2010 12.1829 10.5579
- Reg - Growth
8 Franklin Templeton FTF - Series X (5 Aug 2 , 2010 12.5285 10.1935
Years) - Plan C - Growth
9 Franklin Templeton FTF - Series VIII (60 Aug 2 , 2010 13.3151 10.0906
Months) - Plan A - Growth

10 Franklin Templeton Fixed Tenure Fund - Aug 2 , 2010 14.345 9.6253
Series 6 - Growth
TOP 10 -GILT FUNDS - PERIOD (LAST 12 MONTHS)

( \) Months %
1 Religare Gilt Fund - Long Duration Plan - Aug 2 , 2010 10.918 14.5853
Regular - Growth
2 Baroda Pioneer Gilt Fund - Growth Aug 2 , 2010 13.9253 14.2972
3 Birla Sun Life Govt Securities Fund - Long Aug 2 , 2010 27.4525 11.2199
Term - Growth
4 HSBC Gilt Fund - Growth Aug 2 , 2010 11.8055 5.665
5 Birla Sun Life Gilt Plus Liquid Plan - Aug 2 , 2010 21.5371 5.2672
Growth
6 Kotak Gilt Investment PF & Trust Plan - Aug 2 , 2010 32.2841 5.189
Growth
7 Kotak Gilt - Investment Regular Plan - Aug 2 , 2010 31.6285 5.0306
Growth
8 Edelweiss Gilt fund - Growth Aug 2 , 2010 10.2807 4.8692
9 JM G Sec Regular Plan - Growth Aug 2 , 2010 30.3123 4.6949

10 Birla Sun Life Govt Securities Fund - Short Aug 2 , 2010 18.4819 3.9444
Term Debt - Growth
TOP 10 -ETF FUNDS - PERIOD (LAST 12 MONTHS)

( \) Months %
1 Kotak PSU Bank ETF Aug 2 , 2010 421.5922 51.0064
2 PSU Bank Benchmark Exchange Traded Aug 2 , 2010 408.5409 49.9027

Scheme
3 Bank BeES Aug 2 , 2010 1048.8289 38.5478
4 Reliance Banking Exchange Traded Fund Aug 2 , 2010 1068.7396 38.1473
5 Junior BeES Aug 2 , 2010 117.1604 37.6133
6 Gold BeES Aug 2 , 2010 1741.8806 20.0607
7 UTI Gold Exchange Traded Fund Aug 2 , 2010 1740.6737 19.7211
8 Kotak Gold ETF Aug 2 , 2010 1740.3649 19.6779
9 Quantum Gold Exchange Traded Fund - Aug 2 , 2010 866.0506 19.6509

Growth

10 Reliance Gold Exchange Traded Fund - Aug 2 , 2010 1693.133 19.2341
Dividend
TOP 10 -MIP FUNDS - PERIOD (LAST 12 MONTHS)

( \) Months %
1 HDFC Multiple Yield Fund - Plan 2005 - Aug 2 , 2010 15.6995 16.0704
Growth
2 Reliance Monthly Income Plan - Growth Aug 2 , 2010 20.9161 13.4424
3 HDFC Monthly Income Plan - Long Term Aug 2 , 2010 22.0101 13.3122
Plan - Growth
4 HDFC Multiple Yield Fund - Growth Aug 2 , 2010 17.1464 13.027
5 HSBC MIP - Savings Plan - Growth Aug 2 , 2010 18.836 10.9224
6 Tata MIP Plus - Growth Jul 31 , 2010 15.6519 9.4936
7 Canara Robeco Monthly Income Plan - Aug 2 , 2010 28.37 9.4403

Growth
8 UTI Monthly Income Scheme - Growth Aug 2 , 2010 19.0651 9.045
9 LIC MF Floater - Monthly Income Plan - Aug 2 , 2010 17.6897 9.0356
Growth
10 HDFC Monthly Income Plan - Short Term Aug 2 , 2010 16.6877 9.0346
Plan - Growth

COMPANY OVERVIEW
About Us:
Doing the 'right' thing is a virtue most desirable. The difference between success and
failure is often not dictated by knowledge or expertise but by its actual application and
perseverance. When it comes to successful wealth creation for customers, it is
something that we believe & practice. For us it is more than a mission; it is what defines
our lives and our actions at NJ IndiaInvest. With this passion, we continue to evolve and
make the right product accessions and service innovations in our offerings. To the
advisors, we offer a 360 comprehensive business platform with unmatched IT solutions,
empowering them to set the best practice standards and deliver real value to their
customers. Over the years, our passion has seen us grow from strength to strength and
expand rapidly, setting new benchmarks in the process. But to us, what really matters
most is the number of lives we have managed to transform and we still have a long way
to go...
NJ India Invest Pvt. Ltd. is one of the leading advisors and distributors of financial
products and services in India. Established in year 1994, NJ has over a decade of rich
exposure in financial investments space and portfolio advisory services. From a humble
beginning, NJ over the years has evolved out to be a professionally managed, quality
conscious and customer focussed financial / investment advisory & distribution firm.
NJ prides in being a professionally managed, quality focused and customer centric

organisation. The strength of NJ lies in the strong domain knowledge in investment
consultancy and the delivery of sustainable value to clients with support from cutting-
edge technology platform, developed in-house by NJ.
At NJ we believe in ..
- having single window, multiple solutions that are integrated for simplicity and
sapience
- making innovations, accessions, value-additions, a constant process
- providing customers with solutions for tomorrow which will keep them above the
curve, today
NJ had over INR 5,050* Crores of mutual fund assets under advice with a wide presence
in over 130 locations* in 22 states* in India. The numbers are reflections of the trust,
commitment and value that NJ shares with its clients.
At NJ, we continue to innovate, enrich our intellect, and ask critical questions. We
challenge our own processes and systems on constant basis to emerge more convinced.
At NJ, we continue to expand the scope and depth of our offerings, making apt use of
technological support.
Philosophy:
At NJ our Service and Investing philosophy inspire and shape the thoughts, beliefs,
attitude, actions and decisions of our employees. If NJ would resemble a body, our
philosophy would be our spirit which drives our body.
Service Philosophy:
Our primary measure of success is customer satisfaction . We are committed to provide
our customers with continuous, long-term improvements and value-additions to meet

the needs in an exceptional way. In our efforts to consistently deliver the best service
possible to our customers, all employees of NJ will make every effort to:
- think of the customer first, take responsibility, and make prompt service to the
customer a priority
- deliver upon the commitments & promises made on time
- anticipate, visualize, understand, meet, exceed our customer's needs
- bring energy, passion & excellence in everything we do
- be honest and ethical, in action & attitude, and keep the customer’s interest supreme
- strengthen customer relationships by providing service in a thoughtful & proactive
manner and meet the expectations, effectively
Investing Philosophy:
We aim to provide Need-based solutions for long-term wealth creation We aim to

provide all customers of NJ, directly or indirectly, with true, unbiased, need-based
solutions and advice that best meets their stated & un-stated needs. In our efforts to
provide quality financial & investment advice, we believe that .
- Clients want need-based solutions, which fits them

- Long-term wealth creation is simple and straight
- Asset-Allocation is the ideal & the best way for long-term wealth creation
- Educating and disclosing all the important facets which the customer needs to be
aware of, is important
- The solutions must be unbiased, feasible, practical, executable, measurable and
flexible
- Constant monitoring and proper after-sales service is critical to complete the on-
going process
At NJ our aim is to earn the trust and respect of the employees, customers, partners,
regulators, industry members and the community at large by following our service and
investing philosophy with commitment and without exceptions.
Vision:
To be the leader in our field of business through,

- Total Customer Satisfaction
- Commitment to Excellence
- Determination to Succeed with strict adherence to compliance
- Successful Wealth Creation of our Customers
Mission:
Ensure creation of the desired value for our customers, employees and associates,
through constant improvement, innovation and commitment to service & quality. To
provide solutions which meet expectations and maintain high professional & ethical
standards along with the adherence to the service commitments.
Division:
NJ IndiaInvest has two broad distinct divisions of business as follows:
NJ Fundz Network, started in 2003, is a dedicated channel for providing independent

financial advisors or IFA's with a complete business platform for the strengthening and
development of their advisory practice. NJ offers advisors under its network will all the
products; support and services that enables them add considerable value to their
business, emerge as a 'new age professional financial advisor' and compete confidently
in the industry.
NJ Fundz Network is a unique, first time in India concept that offers such comprehensive
business platform to independent financial advisors.
Established as a distinct entity, NJ Wealth Advisors Pvt. Ltd. seeks to offer

comprehensive financial planning and portfolio advisory services to premium clients.

With NJ Wealth Advisors, NJ seeks to leverage the strong financial advisory and portfolio
management skills gained in over a decade of experience in the industry. NJ Wealth
Advisors offers its clients with quality, unbiased, need-based advisory services &
investment solutions.
This sporadic growth in terms of need of performers in financial advisory services has
lead to the crunch of available performers. Though lots of youngsters are getting into
financial advisory services, but the greatest challenge is of RIGHT SELLING, for which
adequate Training is a prerequisite. Advisory function demands updated knowledge,
backed up by honed skills to fetch effective business. Building long term relationship
with clients depends upon possessing clear edge over others in the field. Hence
continuous people development has an important role in building this fraternity.
Technology has traditionally been NJ's key strength. Our offering on the technological
front is unmatched, vibrant, and comprehensive in nature. Our focus & commitment on
technology can be gauged from the fact that we have set-up distinct entity with a very
strong, talented work-force for the sole purpose of providing the best to NJ in terms of
technology and support. Finlogic Technologies (India) Pvt. Ltd. does all the development
& support work in-house on a continuous basis. It has successfully developed &
implemented a powerful support system for the mutual fund distribution business at NJ
with a provision for integrating the same with other investment products as well as the
financial accounting system.
Management:
The management at NJ brings together a team of people with wide experience and
knowledge in the financial services domain. The management provides direction and
guidance to the whole organisation. The management has strong visions for NJ as a
globally respected company providing comprehensive services in financial sector.
The 'Customer First' philosophy in deeply ingrained in the management at NJ. The aim
of the management is to bring the best to the customers in terms of:
- Range of products and services offered
- Quality Customer Service
All the key members of the organisation put in great focus on the processes & systems
under the diverse functions of business. The management also focuses on utilizing
technology as the key enabler for all the activities and to leverage the technology for
enhancing overall customer experience.
The key members of the management are:

Mr. Neeraj Choksi Jt. Managing Director
Mr. Jignesh Desai Jt. Managing Director
Key Sales Team:

Mr. Misbah Baxamusa National Head
Mr. Naveen Rathod V.P. (Sales)
Mr. Kulbhushan Nandwani A.V.P. (Marketing)
Mr. Prashant Kakkad A.V.P. (Sales)
Key Executive Team :

Mr. Shirish Patel Information Technology
Mr. Abhishek Dubey Business Process
Mr. Vinayak Rajput Operations
Mr. Dhaval Desai Human Resources
Mr. Col. Dixit Administration
Mr. Tejas Soni Finance
Mr. Viral Shah Research
Mr. Rakesh Tokarkar Compliance
Products:

NJ offers advisory and distribution services on the following products.
1. Mutual funds – covering all AMCs & all schemes,

2. Fixed deposits of companies,
3. Government/RBI bonds,
4. Infrastructure Bonds,
5. Approved securities for charitable trusts, etc.
People:
Enthusiasm, Enterprise, Education and Ethics form the four pillars at NJ. At NJ one can
witness the vibrant energy, enthusiasm and the enterprising drive to excel flowing freely
throughout the organisation. At NJ can also experience the creativity, one-to-one
responsiveness, collaborative approach and passion for delivering value.
At NJ people evolve to be more effective, efficient, and result oriented. Knowledge is

inherent due to the education-centric approach and the experience in handling different
clients groups across diverse product profiles.
NJ understands that the people are the most important assets of the company and it is
not the company that grows but the people. NJ hence undertakes rigorous training and
educational activities for enhancing the entire team at NJ. NJ also believes in the
‘Learning through Responsibility’ concept for its employees.
For people at NJ success is not a new word, but is a regular stepping-stone to realising
the one vision that everyone shares.
Culture:
At NJ we believe in transforming the lives of our customers. We exist to create a

difference – a change towards a better life. The culture at NJ reflects this responsibility,

this dream of transforming lives. And we at NJ are always excited and enthused in doing
so.
We believe in keeping ‘You First’, providing you with products and services that meet
your stated and unstated needs. Client satisfaction and client service is the Mantra we
constantly recite. This service oriented philosophy runs throughout the organization,
from top to bottom.
Employees are given ample freedom in their work. The objective is to keep an open,
healthy environment with ample scope for enterprise, improvement, innovations and
out-of-the box solutions
Our efforts are constantly engaged in improving our existing services, offering new and
innovative solutions that go beyond your expectations. This focus has made us one of
the most respected and preferred service providers, especially in the mutual fund
industry.
Service Standards:
Service is the key to unlocking customer satisfaction, which again is key for
sustainability of any business. At NJ we understand this very well. NJ has set strict
processes in place to deliver quality services to customers. At NJ strict quality service
standards are set and a well-defined process is established and followed religiously by
our quality customer service teams. Performance is evaluated on a frequent basis and
glitches are ironed out.
But quality service also involves quality people in addition to processes. NJ gives
significant focus to the proper training and development of the people involved in the
service delivery chain.
Further we,
- Have well-defined "Privacy Policy" to keep clients’ information confidential & internal
audits done on the same at regular intervals

- Receive various statistics which are analysed on an ongoing basis to improve the
service standards
We are committed to improve and enhance our services and undertake new service
initiatives. Such and other services differentiate us with other service providers in the
industry.
Our Service Commitments …
The service commitments are to guide the actions of the people at NJ. Clearly stated,
customers can freely communicate any such actions/events wherein they feel that any
of the following commitments have been breached / compromised. At NJ we desire to
honour our commitments at all points of time and to all our customers without any bias.
- To provide customer-focussed need-based valued services
- To provide reliable, accurate and timely information
- To maintain all records in privacy
- To optimise services/benefits at least justifiable cost
- To develop and grow the customers ’ business
- To provide constructive after sales service
- To honour our service commitments
Recognitions:
Some of the awards & recognitions that we have received in past..
Year 2000:
For Outstanding Performance presented by Chairman, Prudential Plc. at London
Year 2002:
For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at

London
Year 2003:
For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at

London
Year 2004:
Among Most Valued Business Associates presented by HDFC Standard Life at Edinburgh,
Scotland
Year 2004:
For Outstanding Performance by Deputy CEO, Prudential Singapore at Malaysia
Year 2006:
Award for mobilising the Highest Number of SIPs at National Level by Fidelity Mutual
Fund Plc at Mumbai
Year 2006:
Award – Vietnam
Comments from Industry Stalwarts:
The essence of investment consultancy lies in optimal asset allocation as against

security selection or timing the markets for clients. NJ understands this very well and
has added significant value to the clients through this approach. I am sure with this new
initiative; a much larger number of clients will be able to benefit from this approach. I
wish them all the best in this initiative - Prashat Jain, CIO, HDFC AMC
The success of any business lies in innovation ahead of times and NJ has proved it time
again - Rajan Krishnan, Principal Pnb AMC.

360° – Advisory Platform
NJ believes in “360° – Advisory Platform” philosophy …
With this philosophy, NJ try to offer all possible products, services and support which an
Advisor would need in his business.
The support functions are generally in the following areas …
• Business Planning and Strategy

• Training and Development – Self and of employees
• Products and Service Offerings
• Business Branding
• Marketing
• Sales and Development
• Technology
• Advisors Resources - Tools, Calculators, etc..
• Research
• Communications
With this comprehensive supporting platform, the NJ Fundz Partners stays ahead of the
curve in each respect compared to other Advisors/competitors in the market.
Needless to say, the complete NJ Fundz offering is hard to resist
Technology Sales Support
Marketing Support Research Desk

Support 360°
Advisory
ADVENT INSTITUTE Support
OF MANAGEMENT STUDIES 70
Training Support Customer Support
Self Development HR Consultancy
360° Platform
Marketing Support
• Marketing Support
• Sales & Development
• Printshop
• Communications
• Business Planning
Technology Support
• Technology
• Partner’s Desk
Training & Support
• I-Gurukul
• NJ Research Support
• Financial Tools

Customer Care
• NJ Advantage
• Mock CPE Test
MUTUAL FUND ADVISOR
There exists a great potential & opportunity to establish your own mutual fund advisory
practice in India. If you are an existing provider of other investment or insurance
solutions then you can add mutual funds to your basket and move towards being a
'complete financial advisor'.
NJ FUNDZ PARTNER
NJ Fundz Network is a dedicated platform offering comprehensive and unique products

and services for the growth & development of independent financial advisors. NJ's 360°
Advisory Platform, offers advisors with cutting edge solutions and effective support to
create business brand and offer quality value-added services to clients.
360° - Advisory Platform
NJ offers you with a unique, comprehensive business platform to help you grow &
develop your advisory practice in a powerful, effective way. The platform delivers much
more to you, keeping you above curve - both on your business front and on client
services.
Opportunities:
Associate with NJ platform today to gain the NJ Edge

• Multiple product range for your customers
• Working with the Leading Brand in Financial Advisory
• Complete Back Office Support
• Best Technology support
• View all your reports, statements, brokerage, CRM and many more in a Single
Window
• Get your own branded Marketing Material at your door step
• Get regular information regarding new offerings & schemes
• Be a part of largest community of IFA's in India
• Get the dedicated Relationship Manager for your business development
• Get the facility for your client to invest Online or Offiline and view reports of
various kind for both
• Enrollment For All Products
KNOW YOUR CLIENT (KYC)
In order to comply with regulatory provisions under the Prevention of Money

Laundering Act 2002, Rules issued thereunder and related guidelines/circulars issued
by SEBI, KYC formalities are required to be completed for all Unit Holders, including
Guardians and Power of Attorney holders, for any investment (whether new or
additional purchase) of \ 50,000 or more in mutual funds. For the convenience of
investors in mutual funds, all mutual funds have made special arrangements with
CDSL Ventures Ltd. (CVL), a wholly owned subsidiary of Central Depository Services
(India) Ltd. (CDSL)).
DOCUMENTS AND INFORMATION TO BE PROVIDED BY INVESTORS:

Investors in mutual fund schemes have to provide:
(1) Proof of Identity
(2) Proof of Address
(3) PAN Card
(4) Photograph

The originals of these documents along with a copy each to be presented and the
original will be returned after verification. Alternatively, investors can also provide an
attested true copy of the relevant documents. Attestation could be done by Notary
Public/ Gazetted Officer/ Manager of a Scheduled Commercial Bank.
Instead of providing the required documents again and again to different mutual
funds in which one would like to invest, CVL, on behalf of all mutual funds will carry
out the process of KYC and issue an acknowledgement.
Investors have to provide the relevant documents and information ONLY ONCE for
complying with KYC. After that Investors could invest in the schemes of all mutual
funds by merely attaching a copy of the KYC acknowledgement slip with the
application form / transaction slip when investing for the first time in every folio
(Post KYC) in each Mutual Fund house, without the necessity to submit the KYC
documents again.
Any subsequent changes in address or other details could be intimated to any of the
POS (with relevant documentary evidence) and the same will get updated in all the
mutual funds where the investor has invested.
This facility is being provided absolutely FREE OF COST to the investors. To begin
with, investors investing \ 50,000 or more will have to comply with KYC effective
from 1st February, 2008.
WHERE TO COMPLETE THE FORMALITIES
The details regarding the POS (Point of Services) is available in the AMFI site. In case
of investments through POA, the investor as well as POA have to complete the KYC.

NISM for CPE Registration Form

QUESTIONNAIRE
I am doing MBA at Advent Institute of Managemt Studies and this is to acknowledge that
the following survey is purely for academic purpose. My project topic is about knowing
the "Performance Comparison and Investors Perception about Investing in mutual funds”
The identity of the respondent will be kept confidential and it does not carry any
commercial value.
A study of preferences of the investors for investment in mutual funds.
1. What kind of investments you prefer most? Pl tick (√). All applicable
a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund
e. Post Office-NSC, etc f. Shares/Debentures g. Gold/ Silver h. Real Estate
I. PPF j. PF
2. While investing your money, which factor you prefermost? Any one
Liquidity Low Risk High Return Company reputation
3. Have you ever invested your money in mutual fund?
Yes No
If yes,
a) Where do you find yourself as a mutual fund investor?
Totally ignorant [ ]
Partial knowledge of mutual funds [ ]
Aware only of any specific scheme in which you invested [ ]
Fully aware [ ]
b) In which kind of mutual you would like to invest?

Public [ ] Private [ ]
c) how do you come to know about Mutual Fund?

a. Advertisement b. Peer Group c. Banks d. Financial Advisors
d) Which mutual fund scheme have you used?

Open-ended Close-ended
Liquid fund Mid- Cap
Growth fund Regular Income fund
Long-Cap Sector fund

If no,
a) If not invested in Mutual Fund then why?
Not aware of MF Higher risk Not any specific reason
4. which feature of the mutual funds allure you most?

Diversification [ ]
Better return and safety [ ]
Reduction in risk and transaction cost [ ]
Regular Income [ ]
Tax benefit [ ]
5. In which Mutual Fund you have invested? Please tick (√). All applicable.
a. SBIMF
b. UTI
c. HDFC
d. Reliance
e. ICICI prudential funds
f. JM mutual fund
g. Other. Specify
6. When you invest in Mutual Funds which mode of investment will you prefer?
a. One Time Investment b. Systematic Investment Plan (SIP)
7. Where from you purchase mutual funds?

Directly from the AMCs [ ]
Brokers only [ ]
Brokers/ sub-brokers [ ]
Other sources [ ]
8. Which AMC will you prefer to invest?

Assets Management Co.
a. SBIMF
b. UTI
c. Reliance
d. HDFC
e. Kotak
f. ICICI
g. JM finance
9. Which sector are you investing in mutual fund sector?

i. General 1st
ii. Oil and petroleum
iii. Gold fund
iv. Diversified equity fund
v. Power sector
vi. Debt fund
vii. Banking fund
viii. Real estate fund
10. How would you like to receive the returns every year?
a. Dividend payout b. Dividend re-investment c. Growth in NAV
11. Personal Details:

(a). Name:-
(b). Add: -
(c). Age:- Contact No:-
(d). Qualification:- Graduation/PG Under Graduate Others
(e). Occupation. Pl tick (√)
Govt. Sec Pvt. Sec Business Agriculture Others
(g). What is your monthly family income approximately? Pl tick (√).
Up to \ 10,000 \10,001 to 15000
\15,001 to 20,000 \ 20,001 to 30,000 \ 30,001 and above

No of Response %
Yes 24 32
No 51 68
• It was a very tough task to create an awareness of mutual

fund among the insurance advisors. Mostly they were happy
with the insurance product what they are selling and are not
ready to add up a new product in their selling basket. LIC
agents were not ready to sell “Mutual fund” because they
have mis-conception that in mutual fund is only related to
equity market and due to the recent economic slowdown
people are not ready to invest in the market. After explaining
to them about less competition among mutual fund advisors
rather than insurance advisors and after making him
understand about the proper concept of mutual fund, some of
them were considered and were ready to come to meeting or
BOP program for becoming mutual fund advisor.
• Through this research I found that mostly youth insurance

advisors were interested to become mutual fund advisor and
want to add up a new product in their selling basket. The
people who were older, were afraid to appear in any kind of
exam. They usually said that they didn’t have time for the
training as made mandatory by AMFI.
• Investors mostly aged people believe to invest in FD for sure

return rather than MFs.
• Mostly insurance advisors said that commission in MFs is too

low to sell in mkt and comparison with 1 ULIP policy
commission its too less.
• mostly investors who invested in FDs, RDs think that there is

a greater risk and due to lack of advisors they didn't get their
right value.

Suggestions
 Most leads complain about its fees that are \ 8000/ \ 6900.
they said that it is too much amount to complete AMFI exam
and become NJ partner. I know it is nothing in spite of our
company gives them. Consideration can be made to reduce
the fee to stop de motivating from taking our services.
 NJ has almost 25% market stake of mutual fund advisor

(almost 15,000 MF advisors are partner of NJ. whereas total
MF advisors are 75,000 in India.) but NJ is lacking somewhere
in its marketing. NJ needs to advertise its brand to gain the
image of a mutual fund distributer in the minds of insurance
advisors who are more concern with RR and other mutual
fund distributors.
 Whereas, the exam Structure is changed w.e.f. June 5, 2010

with new fee structure and NISM for CPE exam. The
certificate validity is also reduced from 5 yrs to 3 yrs. and
ARN fee increased by over 1000% from \ 500 to 5000 and
validity will reduced from 5 yrs to 3 yrs.

CONCLUSION
From the analysis of the responses received from the investors in Udaipur, majorities of
the investors are found to be conscious and enlightened regarding their investments,
returns and growth.
We have a good market in Udaipur, which comprises potential investors, but due to lack
of basic promotions and publicity these investors are fully aware and whosoever is
aware, their investments decision are done on the basis of security, analysis of risk yield
and return.
The Indian mutual fund industry needs to widen its range of products with affordable
and competitive schemes to tap the semi-urban and rural markets in order to attract
more investors.
The industry has still not been able to penetrate among retail investors and it needs to
share best practices from mature markets like US and Britain where mutual funds are
the most preferred form of investment. Mutual fund companies need to introduce
products for the semi-urban and rural markets that are affordable and yet competitive
against low-risk assured returns of government sponsored saving schemes such as post
office saving deposits.
The industry is also overwhelmed by scarce technological infrastructure and needs to

collaborate with other sectors of the economy such as banking and telecommunications.
Mutual fund companies are also required take advantage of the growing opportunity in
the commodities market. Further, the mutual funds could also enable the small investors
to participate in the real estate boom through real estate mutual funds. With a strong
regulatory framework, clear guidelines and the talent to back it up, the Indian mutual
fund industry is in a position to cater to the new breed of investors who are keen to
diversify their risks.

RECOMMENDATIONS
• Marketing tools should be used at the point of purchase, advertisements through

mass media like newspapers, magazines, exhibitions, SMS on mobiles, and on
internets.
• Organize programmes for customer awareness in developing areas and establish

a confidence and belief among the customers residing their.

BIBLIOGRAPHY
• Magazines
• Business World
• Outlook Money
• NJ Fundz Network July 2010 Monthly
• Offer documents of different schemes
• Fund Fact Sheet
• Investment and Portfolio Management by Prassnna Chandra
WEBSITES
• www.moneycontrol.com/mutual funds
• www.amfiindia.com
• www.mutualfundsindia.com
• www.google.com
• www.njindiainvest.com
• www.njfundz.com
• www.nism.ac.in
• www.investopedia.com

Performance Comparison and Investors Perception About Investing in Mutual Funds at NJ India Invest 2010

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A SUMMER INTERSHIP PROJECT REPORT

IN THE PARTIAL FULFILLMENT FOR THE AWARD OF

ADVENT INSTITUE OF MANAGEMENT STUDIES

UNDER THE GUIDANCE OF: SUBMITTED BY:

This report is submitted as partial fulfillment of the requirement of MBA program of

ADVENT INSTITUTE OF MANAGEMENT STUDIES 2

ADVENT INSTITUTE OF MANAGEMENT STUDIES 3

ADVENT INSTITUTE OF MANAGEMENT STUDIES 4

2. History of Indian Mutual Fund Industry 2-3

3. Basic Organisation of a Mutual Fund 4

4. Important characteristics of a mutual fund 5

5. Objective of a mutual fund 6

6. Mutual fund – But why 6-8

7. Disadvantages of Mutual fund 9

8. Mutual fund structure 10

9. Mutual fund who invests? 11

10. Organisation and management of mutual fund 12-15

11. Mutual fund – types 16

12. Mutual fund – scheme types 17-19

13. Different modes of receiving the income earned

from mutual fund investments 19-20

14. Mutual fund investing strategies 20

15. Mutual fund risk associated 21-22

16. Performance measures of mutual fund 23-27

17. Mutual fund companies in India 28

18. Mutual fund Do and Dont’s 29-31

19. Future of mutual fund industry in India 32-34

20. Rolf of AMFI 35-36

21. SEBI guidelines for mutual fund 37-39

22. ULIP v/s. Mutual fund 39

23. Growth in asset under management 40-42

24. Assets under mgmt as on June 30, 2010 43

25. BCG Report on Equity MF 44-48

ADVENT INSTITUTE OF MANAGEMENT STUDIES 5

27. Company Overview – About NJ India Invest 54-55

28. Philosophy 55-56

29. Vision and Mission 56

30. Division 57-58

31. Management 58-59

35. Service standards 61-62

36. Recognitions 62-63

37. 360° – Advisory Platform 64-65

37. Mutual funds Advisor 66

38. Know your Client – KYC 67-69

39. NISM for CPE Registration Form 70

40. Questionnaire 71-73

45. Bibliography and websites 78

1 ) Understanding Mutual Funds

ADVENT INSTITUTE OF MANAGEMENT STUDIES 6

3 ) Understanding which mutual fund is good for whom.

4) Analyzing Awareness of Mutual Funds among insurance advisors, Post Office -

5) Analyzing risk and return involved in different schemes of mutual funds.

6) Recruitment of partners for NJ Invest.

7) Analyzing investors perception about investing in mutual funds.

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

ADVENT INSTITUTE OF MANAGEMENT STUDIES 7

First Phase: 1964-1987

Second Phase: 1987-1993 (Entry of Public Sector Funds)

Third Phase: 1993-2003 (Entry of Private Sector Funds)

ADVENT INSTITUTE OF MANAGEMENT STUDIES 8

Fourth Phase – Since February 2003

Basic Organisation of a Mutual Fund

ADVENT INSTITUTE OF MANAGEMENT STUDIES 9